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The Bankers' New Clothes: What's Wrong with Banking and What to Do about It: with a new preface by the authors

Author

Listed:
  • Anat Admati

    (Graduate School of Business, Stanford
    FDIC Systemic Resolution Advisory Committee)

  • Martin Hellwig

    (Max Planck Institute for Research on Collective Goods)

Abstract

What is wrong with today's banking system? The past few years have shown that risks in banking can impose significant costs on the economy. Many claim, however, that a safer banking system would require sacrificing lending and economic growth. The Bankers' New Clothes examines this claim and the narratives used by bankers, politicians, and regulators to rationalize the lack of reform, exposing them as invalid. Admati and Hellwig argue we can have a safer and healthier banking system without sacrificing any of the benefits of the system, and at essentially no cost to society. They show that banks are as fragile as they are not because they must be, but because they want to be--and they get away with it. Whereas this situation benefits bankers, it distorts the economy and exposes the public to unnecessary risks. Weak regulation and ineffective enforcement allowed the buildup of risks that ushered in the financial crisis of 2007-2009. Much can be done to create a better system and prevent crises. Yet the lessons from the crisis have not been learned. Admati and Hellwig seek to engage the broader public in the debate by cutting through the jargon of banking, clearing the fog of confusion, and presenting the issues in simple and accessible terms. The Bankers' New Clothes calls for ambitious reform and outlines specific and highly beneficial steps that can be taken immediately.

Suggested Citation

  • Anat Admati & Martin Hellwig, 2014. "The Bankers' New Clothes: What's Wrong with Banking and What to Do about It: with a new preface by the authors," Economics Books, Princeton University Press, edition 1, number 10230, June.
  • Handle: RePEc:pup:pbooks:10230
    as

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    References listed on IDEAS

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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. The Treasury's Missed Opportunity
      by Steve Cecchetti and Kim Schoenholtz in Money, Banking and Financial Markets on 2017-06-19 18:01:13

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    Cited by:

    1. Matteo Benetton, 2017. "Lenders' Competition and Macro-prudential Regulation: A Model of the UK Mortgage Supermarket," 2017 Meeting Papers 1001, Society for Economic Dynamics.
    2. Vittoria, Cerasi & Sebastian, Deininger & Leonardo, Gambacorta & Tommaso, Oliviero, 2017. "How post-crisis regulation has affected bank CEO compensation," Working Papers 365, University of Milano-Bicocca, Department of Economics, revised 28 Apr 2017.
    3. José-Luis Peydró & Andrea Polo & Enrico Sette, 2017. "Monetary policy at work: Security and credit application registers evidence," Working Papers 964, Barcelona Graduate School of Economics.
    4. Robert McKeown, 2017. "Costs, size and returns to scale among Canadian and U.S. commercial banks," Working Papers 1382, Queen's University, Department of Economics.
    5. Claudia Curi & Maurizio Murgia, 2017. "Divestitures and the financial conglomerate excess value," BEMPS - Bozen Economics & Management Paper Series BEMPS43, Faculty of Economics and Management at the Free University of Bozen.
    6. repec:eee:finsta:v:33:y:2017:i:c:p:71-80 is not listed on IDEAS
    7. Aymanns, Christoph & Caccioli, Fabio & Farmer, J. Doyne & Tan, Vincent W.C., 2016. "Taming the Basel leverage cycle," Journal of Financial Stability, Elsevier, vol. 27(C), pages 263-277.
    8. Tayler, William J. & Zilberman, Roy, 2016. "Macroprudential regulation, credit spreads and the role of monetary policy," Journal of Financial Stability, Elsevier, pages 144-158.

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